Large cap to Mid+Small cap ratio

POSTED BY Karthik ON February 16, 2013 8:13 am COMMENTS (10)

I am 28. In my equity MF holdings, what percentage should be large cap, and what should be Mid + small cap.

Currently it is:

Giant       52.29 %

Large Cap   13.79 %

Mid Cap     23.49 %

Small Cap   10.27 %

Tiny        0.12 %

(thanks to valueresearchonline.com portfolio analysis – a free tool)

I have a ELSS investment completing 3 years in next week. So, I will redeem it and invest in another fund to adjust the CAP GAPs.

10 replies on this article “Large cap to Mid+Small cap ratio”

  1. Karthik says:

    Thanks Ramesh and Ashal.
    I will just divide the investment equally in the 5 funds I am currently investing (a mix of large cap / mid cap / Balanced)

    ICICI Pru Focussed Bluechip
    ICICI Pru Discovery
    HDFC Balanced
    HDFC Mid-cap Opportunities
    Quantum Long term equity

    1. Ramesh says:

      If you really want to rebalance, then it is a better idea to invest in the ‘underperforming’ fund, rather than the artificial large, mid, small, tiny allocations.

      The VROL classifications are not an industry wide use. Also, if you will look into morningstar, it will classify even further into large-value, large-growth, etc. Just too much noise, imo.

  2. Dear Karthik, if you are deciding your choice on the basis of classification given by VROL, the same may change after few months. what ‘ll you do then?

    Thanks

    Ashal

  3. Ramesh says:

    Karthik,
    Do you think these allocations levels will remain static over time, even if you do not change by adding or subtracting.

    Just because VRO gives you this ‘artificial’ distinction, it does not mean you need to act on it.

    1. Karthik says:

      Ramesh,

      yes, the Fund manager may change the portfolio over time, but since they release the portfolio every month, what VROL shows may not deviate much from the actuals.

      I wanted to have more Midcap/Small cap – so that in a long run I get better returns

      1. Ramesh says:

        1. Some fund managers change fast, others very slowly, while there are some who change slow/fast depending upon their analyses. Which are yours?

        2. I was mentioning that division into so many different categories by VROL is just artificial. VROL provides you a lot of data, but you need to think whether that data is really informative or just ‘noise’.

        3. More risk does not necessarily translate into more returns. Before doing any major changes in your portfolio, first think and brainstorm about it, and then act.

  4. bharat shah says:

    though i concur the basic ‘It is a question of risk appetite’ . however i like to share my observation that though as a whole market ,the mid cap and small cap segment (read the mid cap and small cap indices) doing poor in recent past compared to large cap segment (read major indices) , you could find the selected mid cap and small cap equity mfs ( again read based on morningstar.in Analyst Rated(better rated i.e. bronze and above!) performed as good as large cap equity mfs rated similarly. so for long term equity mfs investors 50:50 could be thought.

  5. I think this is quite fine. This is close to what I have. This minimizes risk while not compromising on returns too much. I expect not more than 10-12% from equity over a long time when I plan.

    1. Karthik says:

      I thought I will change it to 50% in (Large + Giant) and 50% in (Mid + Small). currently it is 65:35 for me.

      1. I have about 70:30. It is a question of risk appetite. For me the only reason I invest in equities is to beat inflation. Investing in 100% large caps should do that for me (assuming no LTCG) so why take more risk than I should is the way I see it.

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